Many colleges publish lists of recommended lenders, called
preferred lender lists. Usually there are several lists, with
each list focusing on a different category of loans. The preferred
lender lists can include lists for undergraduate Stafford loans,
parent PLUS loans, graduate Stafford loans, graduate PLUS loans,
consolidation loans, and private student loans. Most preferred lender
lists include 4 to 10 lenders.

No Uniform Criteria

Each college sets its own criteria for which lenders will appear on
its preferred lender list. Although the process is in most cases
objective and unbiased, it is not necessarily focused solely on
cost. Many colleges consider other factors, such as the quality of
customer service, the speed of problem resolution, and counseling
activities. For example, most students want 24/7 customer service via
toll free phone numbers and online interfaces, but don't realize this
until later. Likewise, when alumni encounter problems with a lender,
they usually turn to the financial aid office at their alma mater for help.

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The college may also consider the availability of tools from the
lender to ease their administrative burden, such as an online
interface to streamline the certification, processing, disbursement
and management of loans borrowed by the school's students. Some
colleges may receive payments or other benefits from the lenders, and
should disclose this prominently with any publication of the preferred
lender list.

Borrowers May Pick Any Lender

Federal law requires colleges to certify federal education loans
without regard to the borrower's choice of lender or the guarantee
agency used by the lender. So you can choose any lender, including
those that are not on the college's list of recommended lenders.
Colleges are prohibited from introducing artificial delays into the
loan certification process.

If a college or lender provides you with a loan application that has
the lender name and code already filled in, you are not required to
use that lender. You can substitute the lender of your choice.

Shop Around

So while a college's preferred lender list is a good starting point,
prospective borrowers should also look at other lenders, such as
lenders that advertise in print, on air, online and by mail. Which
lender you choose does make a difference, as lenders offer loan
discounts that can save you hundreds or thousands of dollars of
interest over the lifetime of the loans.

FinAid has
comprehensive lists of education lenders, including
lists of
education lenders,
student loan discounts
and private student loans.
State guarantee agencies and non-profit lenders sometimes have some of
the lowest interest rates on federal and private student loans. These
rates may be restricted to students who are state residents or attend
a college in the state. Be sure to compare these rates with the rates
available from banks and other for-profit lenders.

So do a little research on the lenders, instead of blindly picking the
first lender on the preferred lender list. Visit the lender web sites
for the latest information on their discounts and services, and put
together a chart comparing and contrasting the lenders according to
the features that are important to you.